Philippine stocks may decline due to profit taking

By Sheldeen Joy Talavera, Reporter

PHILIPPINE SHARES are expected to fall this week due to increased profit taking after the back-to-back oversold rallies on Friday.

Stocks may also trade sideways “with a sense of caution,” AB Capital Securities, Inc. Vice-President Jovis L. Vistan said in a Viber message at the weekend.

“From a technical perspective, the Philippine Stock Exchange Index (PSEi) recently breached crucial support levels but subsequently recovered on unstable footing,” he said.

Confidence appears to be wavering due to hawkish warnings from both the US Federal Open Market Committee and the BSP regarding interest rates for the next nine months, he added.

“The consensus view is that inflation will be a lingering issue that will hound the market,” the stock analyst said. He put the support level at 5,800 and resistance 6,200 points.

The PSEi gained 0.78% or 48.08 points to end at 6,142.79 on Friday. The broader all-share index increased by 0.69% or 22.88 points to 3,316.95. The index gained 0.27% or 16.45 points from a week earlier.

Both the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve kept benchmark interest rates steady last week but maintained a hawkish stance.

The Monetary Board maintained its overnight reverse repurchase rate at 6.25%, as expected by 14 economists in a BusinessWorld poll last week. Interest rates on the overnight deposit and lending facilities were also unchanged at 5.75% and 6.75%, respectively. 

It was the fourth straight pause from the Philippine central bank.

“We may see increased profit-taking activities next week following the back-to-back oversold rallies at the tail end of this week,” China Bank Securities Corp. Research Associate Lance U. Soledad said in an e-mail on Friday.

“As the Fed and the BSP affirmed their hawkish stance at their policy meetings, we suggest that investors look for swing trade opportunities (i.e., buy low and sell high), prioritizing stocks which have already started to bounce from their lows and are currently establishing new bases,” he added.

BSP Governor Eli M. Remolona, Jr. on Friday said the Monetary Board was not done hiking key rates and was likely to raise these at its next meeting in November if inflation remains elevated.

“The local stock market may enter a phase of sideways movement, with a projected range of 6,100 to 6,300 for the coming weeks,” Seedbox Securities, Inc. equity trader Jayniel Carl S. Manuel said in a Facebook Messenger chat.

“Despite the BSP and Fed’s decisions to hold rates steady, Fed Chairman Jerome H. Powell’s comments hinted at a more cautious approach,” he said. “Additionally, the Federal Open Market Committee has reduced its projections for potential rate cuts in the next year from 100 basis points to 50 basis points.”

Mr. Soledad put the stock market’s support level at 6,000 and resistance at 6,150 points.